Great News, Rich Americans, Looks Like Obama's Caving On Dividend Taxes!http://www.businessinsider.com/dividend-taxes-and-the-fiscal-cliff-2012-12/comments
en-usWed, 31 Dec 1969 19:00:00 -0500Wed, 13 Dec 2017 21:28:40 -0500Henry Blodgethttp://www.businessinsider.com/c/50d338de69bedde173000002DRodThu, 20 Dec 2012 11:12:14 -0500http://www.businessinsider.com/c/50d338de69bedde173000002
Actually, Henry, you COMPLETELY missed the point. You need to go to a basic tax class. Dividends should have favorable tax rates because dividends are NOT DEDUCTIBLE by corporations. So a company that pays a dividend has to pay tax on that payment and then so does the shareholder who receives the dividend payment. So if a Corporation pays a dividend, they could have to pay up to a 35% tax and then the shareholder receiving it pays 15% in tax when they receive it. That's up to 50 cents of tax revenue on the dollar. If you argue that some corporations don't pay tax due to "loopholes" then I would say to you, keep the rates the same and GET RID OF THE LOOPHOLES.
That's EXACTLY what Boehner and Obama should be discussing right now. They should be getting rid of loopholes. Instead (because neither one of them understand taxes) they are bickering over rates. But it still does not change the fact that dividends are NOT DEDUCTIBLE by corporations. It would only make sense to make dividends fully subject to ordinary tax rates like interest income if you made the dividends FULLY DEDUCTIBLE like interest expense. A lot of my older clients live off of their dividends because social security ain't getting it done. They aren't the "evil rich" as you imply. Most of them never made more than $40k a year in their life. But they're good peole who were smart enough to not spend every penny they earned and put it in something that paid a dividend instead of a CD paying 0 POINT NOTHING. Good for them! We should ALL be doing the same!http://www.businessinsider.com/c/50d28a5569beddd051000005Eric WalkerWed, 19 Dec 2012 22:47:33 -0500http://www.businessinsider.com/c/50d28a5569beddd051000005
How to lie with numbers. Look at it this way: 53% of all dividend income is earned by American households that make less than $200,00 per year. My wife and I worked hard over long working careers to accumulate a modest retirement sum now invested in conservative mutual funds, from which we take the great majority of our everyday living income, less than a thousand dollars a month (a sum possible only because we live in a deeply rural area). But the "tax the rich" movement, for whom--apparently--anyone over the poverty line is "rich", now want to take 25% of our monthly household money away from us because they think we are fat, top-hatted Monopoly Man caricatures. Get a life first, then talk about "taxing the rich".http://www.businessinsider.com/c/50d2200069beddc14700000eracerrickWed, 19 Dec 2012 15:13:52 -0500http://www.businessinsider.com/c/50d2200069beddc14700000e
If they were smart, they'd let companies expense dividends and then tax them as ordinary income.http://www.businessinsider.com/c/50d1fd56ecad04f36b000020mlambWed, 19 Dec 2012 12:45:58 -0500http://www.businessinsider.com/c/50d1fd56ecad04f36b000020
I couldn't agree with you more. It's nice to see a logical person posting on these forums.
Point #4 is constantly overlooked in my opinion. No one ever talks about the use of proceeds. It's the most important part of the entire equation.http://www.businessinsider.com/c/50d1fb07eab8ea9e2700000bRandom JoeWed, 19 Dec 2012 12:36:07 -0500http://www.businessinsider.com/c/50d1fb07eab8ea9e2700000b
Where to start . . .
First, the tax change isn't saving rich people money. Rich people will pay a higher dividend tax rate next year, not less. You act like only raising dividend tax rates by 880 bps is an act of extreme generosity.
Second, you really need to rethink what you mean by "rich Americans." We all get the anger toward over-compensated CEO's of public companies, trust fund kids, Wall Street bankers, and hedge fund managers. But the vast majority of families in this country who make $250K-$500K aren't "rich." They are generally dual-income households or people who worked most of their life at lower comp levels until they were finally in a position to either start a business or move up to senior management in a company. They don't live in mansions, own yachts, or jet around the globe on their private planes. They do worry about paying for their kid's college, save money so they can retire,donate generously to charity, and care deeply about their employees and co-workers.
Third, I'm sure you get (but ignore) the whole idea of multiple layers of taxation. People, rich or not, buy investments with after-tax money -- after already paying taxes on the money, get it -- and then have to continually pay tax again on the gains generated from that previously-taxed money. The money is then taxed a third time when they die.
Fourth, did it ever occur to you that most Republicans would be willing to pay more taxes if they thought the money would be used wisely? Maybe that's the hang up for Republicans, not that they're all greedy bastards out to cheat the hard-working? Why would anyone willingly pay more in taxes when we all know the money will just be wasted on more frivolous government spending (BTW, would love to see you devote even a fraction of the space you use to blather on about which WS firm holds the best Christmas party to look at issues like this in more depth).
Fifth, oh who cares really . . . .http://www.businessinsider.com/c/50d1f867eab8eaec22000003Ted SWed, 19 Dec 2012 12:24:55 -0500http://www.businessinsider.com/c/50d1f867eab8eaec22000003
There are multiple problems with the "double taxation" argument against taxing dividends.
First, ask yourself when you invest in a public corporation that is traded on an exchange, how much economic benefit is generated? ... Nearly None!. The company that you are "investing in" does not see a dime of your investment (unless you purchased your shares prior to the IPO). All of your "investment" went to a trader / investor who decided to sell their stock at the time you chose to buy it. Now if we are talking VC or private placement deals in new or expanding business, those folks are investing directly into the company and taking on a lot more risk (liquidity investment w/ little or no track record) and deserve a break in taxes.
Second, most Americans own stock inside of a tax deferred account (IRA, 401K). There is no mechanism to track the type of income when the money is withdrawn, therefore most Americans pay taxes on dividends as ordinary income when the funds are withdrawn sometime in the future. Fair?
Third, not all company choose to pay dividends, but choose to buy back stock that also benefits shareholders. Why should the fed govt favor one method of boosting stock price over another? Neither of these tactics benefit the nation vs. a company using their excess cash to make additional investments.
Forth, the corporation and the individual investor are separate entities. If cash transfers between separate entities are not taxed using the argument that the fist entity was already taxed can be applies to almost any transaction.
Now if you wanted to encourage more companies to pay dividends and put more money in the economy, then allow them to deduct their dividend payments. But then again, those in the boardrooms who make the dividend payment decision my not benefit as much. Too bad.http://www.businessinsider.com/c/50d1ef43eab8eae108000012marckedWed, 19 Dec 2012 11:45:55 -0500http://www.businessinsider.com/c/50d1ef43eab8eae108000012
This news magazine has the biggest crush on Obama. Embarrassing. You forgot about retirees and their dependence on dividend and capital gain income.http://www.businessinsider.com/c/50d1ec4b69beddf44600001cPaulPeterWed, 19 Dec 2012 11:33:15 -0500http://www.businessinsider.com/c/50d1ec4b69beddf44600001c
Yes, yes, this will help the rich. That said, there are a lot of 70+ folks, who made a decent living, lived frugally, saved, and RELY on dividend income on top of SS. They're not poor but not rich by any means. Given the Fed and "save the banks at all cost" policy of 0% interest rates, there's a lot of old folks on the margin financially. I'm not old or rich, but it makes me squeamish to think of an 80yr old as some sort of cash cow for our out-of-control spending problem. Even if said 80yr old is part of the 'problem' due to SS and Medicare spending.http://www.businessinsider.com/c/50d1ebe16bb3f70733000015exAOLVPWed, 19 Dec 2012 11:31:29 -0500http://www.businessinsider.com/c/50d1ebe16bb3f70733000015
This is actually a good thing for everyone. Have you been paying attention as many companies have been BORROWING to pay dividends this month that are equivalent to many years worth of future dividends? Like Costco paying 7 years worth of dividends this year to avoid tax hikes on dividends that are expected. That money can not be reinvested in their businesses, including the new money needed to pay interest. So what happens is that jobs that would have been created aren't. And it's not just big businesses - there are plenty of smaller scale businesses doing exactly the same thing.http://www.businessinsider.com/c/50d1e920ecad04fe4400002aDan AfrasiabiWed, 19 Dec 2012 11:19:44 -0500http://www.businessinsider.com/c/50d1e920ecad04fe4400002a
great point.http://www.businessinsider.com/c/50d1e73cecad040245000003MekongcolaWed, 19 Dec 2012 11:11:40 -0500http://www.businessinsider.com/c/50d1e73cecad040245000003
It should be noted the short term cap gains is taxed the same as income. it's only long term cap gains (held for more than a year) which is taxed at the 15% mark.http://www.businessinsider.com/c/50d1e6ddeab8ea6e7700000bDan AfrasiabiWed, 19 Dec 2012 11:10:05 -0500http://www.businessinsider.com/c/50d1e6ddeab8ea6e7700000b
Henry, its morally and economically wrong to take the position that dividends should be taxed heavily, without pointing out that the income has already been taxed once at the corporate level. I realize that a lot of corporations use tax credits and other games to keep their corp tax rates lower than the nominal rate, but that is a different issue that needs to be addressed.
On its face, if a corporation makes $100, the government takes $30 off the top. That leaves $70 for shareholders. If $70 s paid out to shareholders in the form of dividends, and is taxed at 30%, then it leaves $49 in shareholders' pockets, after tax. Therefore, the original $100 earning was actually subjected to 51% tax rate, when to the average person it looks like 30%.http://www.businessinsider.com/c/50d1e6d96bb3f7952e000006clamboWed, 19 Dec 2012 11:10:01 -0500http://www.businessinsider.com/c/50d1e6d96bb3f7952e000006
The author favors higher taxes. How does taxing capital gains 1. help the economy? 2. raise more tax revenue?
The money I make from capital gains and dividends has been taxed, but Obama wants to tax it several times again.
1. I have earned income. I pay social security, medicare, income tax. I then pay state income tax.
2. AFTER my income is taxed, I buy a stock. I risk losing 100% of my money.
3. The company has profits (hopefully) which are TAXED.
4. The company pays me a dividend, and Obama wants to RAISE taxes on my money.
Liberals all have the same problem with their feeble brains, like the author: He assumes that the "tax cut" is the government "giving me" my own money. Liberals assume that all money and all proceeds from all economic activity belongs to the government.
This is wrong, the government is not giving me back my own money when tax rates are low. I was always MY money.
You guys in NYC need to travel to places like Switzerland and see how they manage to get by without high taxes.http://www.businessinsider.com/c/50d1e602eab8ea9374000010nerdbertWed, 19 Dec 2012 11:06:26 -0500http://www.businessinsider.com/c/50d1e602eab8ea9374000010
Henry, serious question: what will this do to Federal government INCOME? I ask, because if you look at what the government takes in from the capital gains tax, every time the government has cut the rate the net INCOME to the government has risen above the trend line. Similarly, every rate rise since WWII has corresponded to a DROP in Federal income. (And yes, I've linked to that table before on this site and don't want to go searching for it again.)
Don't get me wrong, I'm all for screwing trust fund babies after having lived near too many of them in Vermont and I've advocated taxing trusts here before, but I want to know what raising the tax RATE will do to the Federal budget and how you plan on dealing with that.
(My own view is that a flat tax rate on ALL income with absolutely no deductions is preferable from a libertarian, free market viewpoint. But then again, I'm not interested in controlling how other people behave more than the barest minimum because I also firmly believe in the right of anyone to go to hell in the manner of their own choosing.)http://www.businessinsider.com/c/50d1e47969bedd433200001cdividends are already taxedWed, 19 Dec 2012 10:59:53 -0500http://www.businessinsider.com/c/50d1e47969bedd433200001c
at the 35% corporate rate. So, $100 earned is $65 and distibruetd and attracts another 15%, so $9.75 more to bring it down $55.25.
That a 44.75% tax rate. Probably the highest in the world on corporate distributed income. at least the OECD, except maybe Italy and Japan.
and you guys are whining and say they should pay more?http://www.businessinsider.com/c/50d1e360eab8ea1e6f000015bittergreenWed, 19 Dec 2012 10:55:12 -0500http://www.businessinsider.com/c/50d1e360eab8ea1e6f000015
"the resulting tax rate will still be historically low.""
"Historically low" being a euphemism for highest marginal tax rate since 1986.http://www.businessinsider.com/c/50d1e15deab8ea9f6c00000aBob123Wed, 19 Dec 2012 10:46:37 -0500http://www.businessinsider.com/c/50d1e15deab8ea9f6c00000a
Republicans did not learn from the last election? You've got to be kidding me, right?
Look how determined Boehner is to be sent to the slaughter house, cave in on anything to "reach a deal" at any cost without conservative principles (not social, but the economic fiscal ones)?http://www.businessinsider.com/c/50d1e06c69bedd302c00000fBob123Wed, 19 Dec 2012 10:42:36 -0500http://www.businessinsider.com/c/50d1e06c69bedd302c00000f
Great.
Less tax cut, less spending cut.
I am all for them. Let's ramp up the deficit. Let the suckers like the Chinese buy our bonds. I will be happier if we have tax cut and spending increase.http://www.businessinsider.com/c/50d1e01e69bedd322f000001my.commentWed, 19 Dec 2012 10:41:18 -0500http://www.businessinsider.com/c/50d1e01e69bedd322f000001
i was wondering how hopey was going to do it ... no time like during a national catastrophe when attentions are drawn elsewhere to fulfill his puppetmasters wishes...
what a fraud.http://www.businessinsider.com/c/50d1dfd4ecad04be35000008Mr. BoehnerWed, 19 Dec 2012 10:40:04 -0500http://www.businessinsider.com/c/50d1dfd4ecad04be35000008
Henry,
The last line of your article is a little misleading and shows your obvious bias. It is Obama that will be cutting the deal on dividend taxes for rich Americans.
You are such a liberal hack, you cant even place blame where blame belongs. This type of slanted BS is exactly whats wrong w/America today. Call a spade a spade. Your boy Obama doesnt want to bite the hand that feeds him and is hooking up the 1%. Why is that so difficult to say? Republicans have always had this position and fight for it - its Obama that is the liar.http://www.businessinsider.com/c/50d1de5deab8eaa067000001BCMWed, 19 Dec 2012 10:33:49 -0500http://www.businessinsider.com/c/50d1de5deab8eaa067000001
Since that's exactly what I saidhttp://www.businessinsider.com/c/50d1de3a69bedd5921000021bucketheadWed, 19 Dec 2012 10:33:14 -0500http://www.businessinsider.com/c/50d1de3a69bedd5921000021
You are exactly right. Excellently written as well. I wonder why Henry didn't choose this comment for his "Board Room"?http://www.businessinsider.com/c/50d1dd98eab8ea0560000013really???Wed, 19 Dec 2012 10:30:32 -0500http://www.businessinsider.com/c/50d1dd98eab8ea0560000013
Aw shucks, that 20 billion a year loss would have certainly helped our trillions of debt...http://www.businessinsider.com/c/50d1dd0369beddf92300000eRBWWed, 19 Dec 2012 10:28:03 -0500http://www.businessinsider.com/c/50d1dd0369beddf92300000e
...Bet they forgot...http://www.businessinsider.com/c/50d1dcdf69bedd611e000027RBWWed, 19 Dec 2012 10:27:27 -0500http://www.businessinsider.com/c/50d1dcdf69bedd611e000027
My guess is that somebody realized that a lot of savers have been pushed into dividend paying equities due to low bond/cd yields, thanks to Fed policy. That number my not be huge, but I'm guessing the impact on them would be greater than on the 47% mentioned above.
Just wait and see what happens to these savers when rates move the other way and their principal gets hit. Bet they didn't forgot that the move to equities skewed their standard deviation.http://www.businessinsider.com/c/50d1dcd5eab8ea875f000013Kathy DWed, 19 Dec 2012 10:27:17 -0500http://www.businessinsider.com/c/50d1dcd5eab8ea875f000013
Republicans are screwing high wage earners to benefit trust fund babies. I'm in the former and this is enough for me to say bye bye to the republican party. They apparently didn't learn from the last election. Their actions will only serve narrow the base. How many trust fund babies are there? Is that enough to get you elected?http://www.businessinsider.com/c/50d1dc9a6bb3f7e31600002amlambWed, 19 Dec 2012 10:26:18 -0500http://www.businessinsider.com/c/50d1dc9a6bb3f7e31600002a
Henry,
This is one of the most populist articles you have ever written.
"Unlike the change in income taxes and capital-gains taxes, that change is big enough to create a strong incentive for changes in behavior."
Why would you want to create an incentive for people NOT to invest their excess cash?
Also - sell me on the idea that dividends should be taxed as ordinary income. I earn a wage - it is taxed at the ordinary income rate. A company uses that money to create profit. This profit is subject to payroll tax, medicare/SS, and corporate income tax. How much more does the government want?
Also - at the anemic rate this economy is growing, if dividends were taxed as ordinary income, there would be little reason to invest as your hurdle would be MUCH higher.http://www.businessinsider.com/c/50d1db87ecad04102f000013txchick57(?)Wed, 19 Dec 2012 10:21:43 -0500http://www.businessinsider.com/c/50d1db87ecad04102f000013
Damn straight, he'd better. WTF??????????????????http://www.businessinsider.com/c/50d1d96eecad046a26000022alan1Wed, 19 Dec 2012 10:12:46 -0500http://www.businessinsider.com/c/50d1d96eecad046a26000022
Henry you should run this article every day
till the american people realize how both dems and Republicans are lying to the voters .http://www.businessinsider.com/c/50d1d96aecad04832800001dhuh?Wed, 19 Dec 2012 10:12:42 -0500http://www.businessinsider.com/c/50d1d96aecad04832800001d
Those 47% takers! poor people are evil. Taking from rich people..lolololol and the rich do not take from society....
damn class warfare....http://www.businessinsider.com/c/50d1d88beab8ea965500000balan1Wed, 19 Dec 2012 10:08:59 -0500http://www.businessinsider.com/c/50d1d88beab8ea965500000b
most of us on this site know this info . but now that pres o will cave in will be more reason to dislike all these politicians who continue to lie . . all hypocrites about doing whats right for the american public . really sickeninghttp://www.businessinsider.com/c/50d1d7ab69bedd0919000004alan1Wed, 19 Dec 2012 10:05:15 -0500http://www.businessinsider.com/c/50d1d7ab69bedd0919000004
michael t / you are 100% correcthttp://www.businessinsider.com/c/50d1d77aecad042422000041JMRWed, 19 Dec 2012 10:04:26 -0500http://www.businessinsider.com/c/50d1d77aecad042422000041
Who couldn't have seen this coming? Obama isn't the populist, out for the little guy, that he made himself out to be during the election. Nope, he's all about serving the oligarchs and enriching the 1%. Meanwhile millions of ignorant americans who voted for him will think he's standing up to the Republicans in their latest chapter of the Fiscal Cliff Kabuki Theater while they are getting screwed by the very man they worship. How can people not see this charade for what it is? There will be no meaningful cuts to spending and just more handouts for everyone who has a hand out. We're not going over the fiscal cliff, we've already been over it and now it's just a matter of how big of a splat we're going to make when we hit bottom.http://www.businessinsider.com/c/50d1d761eab8ea405500000ealan1Wed, 19 Dec 2012 10:04:01 -0500http://www.businessinsider.com/c/50d1d761eab8ea405500000e
this is why the republican party is going to lose a great deal of their base voters . they have been trying to lie and cheat for the benefit of the top 5% .http://www.businessinsider.com/c/50d1d746eab8ea4455000014unfavorable oddsWed, 19 Dec 2012 10:03:34 -0500http://www.businessinsider.com/c/50d1d746eab8ea4455000014
The Oracle gets his way once again. Buffett's got to be lovin' that low cap gains tax rate!!
What about that carried interest? Are Schumer and Blumenthal also going to deliver the goods?
If Republicans really want to get Dems tied up in knots, the easiest way is to eliminate the deductibility of state income tax.http://www.businessinsider.com/c/50d1d5c069bedd460d00001cBCMWed, 19 Dec 2012 09:57:04 -0500http://www.businessinsider.com/c/50d1d5c069bedd460d00001c
Who-hooo! Time for Henry Blodget bang the tired doldrums of class-warfare, "us vs. them", rich people are evil, people keeping the money thery earn is bad, etc. once more!http://www.businessinsider.com/c/50d1d4896bb3f77d0900000fMichael T.Wed, 19 Dec 2012 09:51:53 -0500http://www.businessinsider.com/c/50d1d4896bb3f77d0900000f
This is a really great point. Thank you Henry for pointing out the key things most media are missing: The highest marginal ordinary income tax rate is not what the 1% cares most about ... but rather its Dividends, Capital Gains, and Estate Tax laws that matter most. I have suspected all along that Boehner will compromise most easily on the ordinary income tax rate in order to preserve these more important tax rates at relatively low, and preferred, levels.http://www.businessinsider.com/c/50d1d3cd69bedd570d000005Beltway GregWed, 19 Dec 2012 09:48:45 -0500http://www.businessinsider.com/c/50d1d3cd69bedd570d000005
Drop short term capital gains and I'll walk that damn dog for the rest of its life.